Industry Profile
International Management Group is a global sporting company that was established by Mark McCormack in 1960. McCormack developed the interest of forming the company in 1950s. By 1958, McCormack had put into place various structures that would enable him realize his dream of forming a sporting company.
McCormack was involved in a nasty road accident at a tender age of six, which incapacitated him to an extent of not participating actively in sports. However, he never gave up his ambition of participating in sports, a factor that made him participate in several armature sports winning a number of gold medals.
Upon careful analysis of sports industry, McCormack came to the realization that sports personalities could be marketed just like other conventional products. Based on this reality, he formed the company in order to market sport personalities in New York, which was the first target market.
The firm grew so fast because the market was completely new and the firm did not face any competition. By the time the company was formed, sportsmen and women largely depended on large companies that could support them. However, most talents went unnoticed.
This company therefore was really pertinent at the time when sporting events were becoming global and more marketable. The company recruited various sportsmen and women who were later included into various international teams at an agreed fee. Currently, the firm is considered as the largest distributer of sports goods, with a library of over 150,000 hours.
The firm has increasingly been profitable even in the face of the current stiff competition in the market, which is characterized by dubious individuals who would violate industry rules to attain their selfish interests.
In this industry, IMG is the undisputed industry leader. The firm has 3,000 employees, with annual revenue of $ 1.6 billion dollars. Following the industry leader closely is Interpublic Company, which operates other numerous businesses. It becomes very difficult to determine the specific revenue generated from sports industry. However, the firm has 62, 000 employees, with a total annual revenue of $ 7.2 billion.
Clear Channel Entertainment Company comes third. Through acquisition of other firms, the market leader has radically grown and is currently operating in over 30 cities in 75 venues within the United States. The firm has 36,350 employees, who are spread in different regions, with annual revenue of 5.3 billion US dollars.
William Morris Agency is a distant fourth player, with 600 employees and annual revenue of 16.6 million US dollars. The top five is closed by Creative Artist Agency, with 410 employees and annual revenue of 11.5 million US dollars. The most active business areas, where most competitors engage in include athletics, models, authors, speakers, artists, and actors. IMG has its headquarters in New York City.
Based on annual revenues and the number of employees, IMG would be considered as the industry leader. The firm has a large number of employees, with attractive yearly revenue. The main competitive advantage, which makes the firm outsmart others in the sports industry is diversity. It is the most diversified firm in the sports industry meaning that its branches are spread all over the world.
The firm does not specialize in a single business but deals with a number of businesses. This makes it possible for the firm to balance its books, especially in cases where one of the sectors is hit by a financial crisis. At no particular point would all sectors of the economy be affected in the global market.
As such, the firm would continue to generate profits even in the face of such unfortunate incidents as recession. The firm has held this position for over a decade and its attractive growth rate shows that it would most likely stay in this position for a very long period. Specific individuals own this firm implying that decision-making is fast and easy.
Industry Analysis
This industry is considerably old, though not vibrant as other industries. For a long time, the sports industry has not been considered to be active to generate revenue for the country just like other industries such as banking, oil, and transport. This is demonstrated even in the curriculum of most institutions of higher learning.
For a long period, there were absolutely no curricula for sports in institutions of higher learning since sport was considered a leisure activity. However, with the changing aspect of sport, the industry has come out as a pillar for the economy of many countries. In the United States, the industry accounts for up to 11 percent of the country’s economy.
Competition has been on the rise as more companies come to the realization that sport is a potential business. In order to bring out the competitive nature of the industry, Porter’s five forces would be of great help.
Rivalry
The market in this industry is becoming more and more competitive. Many firms are coming into the market with similar products. There has been a massive influx of small firms specializing in specific sports, making competition very stiff. These small firms, with specific target markets, tend to offer more specialized products as opposed to large firms, which are diversified. This makes it difficult for the large firms to manage competition in specific sectors in the sports industry.
Small firms are therefore a real threat to big firms and therefore, big firms are always keen on ensuring that they maintain their lead in the market, irrespective of competition. This has led to massive rivalry in the sports industry. Some individual employees have worsened the situation.
They take away customers from the leaders in the industry and form their own small firms, which are meant to compete with big firms. This creates an environment where firms are not only competitors but also bitter rivals, leading to a scenario where firms could do anything to outsmart competitors.
This makes the business environment very unattractive as many firms spend valuable time and resources figuring out how to bring down other firms rather than strategizing on how to expand to other new regions. The above named industry leaders are keen to ensure that they remain at the top.
This has led to the formation of competitive strategies aimed at bringing down rivals but not ensuring the success of the company. Small firms are also keen on ensuring that they are not faced out of the market. As such, they have launched competitive strategies that would enable them survive in the competitive market. The competition is so strong to an extent that any mistake made by any industry player would push it out of the industry.
Threat of Substitute
Porter clearly stated that one of the main threats is the availability of close substitutes. In the sports industry, the threat is present. Sporting industry has several games. Individuals admire different games and to different extents. Football is the most popular sport in Europe but there are other sports such as baseball, which is popular in the US.
The threat posed by a substitute is not very strong for sports industry in the US. An individual who is talented in golf would not find it easy to switch to hockey because he does not have a talent. The availability of substitutes therefore does not pose a serious challenge to the industry, though the concerned individuals should not assume it.
Buyer Power
One of the most important factors in the industry, which would always affect companies, is the power of buyers. In this case, buyers are big clubs around the world. The power to bargain would have a huge impact on players. The bargaining powers always depend on the number of buyers in the market.
There are a lot of good clubs, which are potential markets for players in the sport industry in the US. This would reduce the bargaining power of the US clubs. This makes the sports industry profitable, since the buyers may not set prices for customers.
Supplier Power
The supplier power would also affect the profitability of a firm. In cases where suppliers are a few, they would tend to dictate the prices of products and services. This would reduce the profit margin of firms in the industry.
In the sport industry, there is a big number of suppliers, as different agents would scout for talents and deliver them to sporting clubs. This makes sports firms unable to dictate the prices that would be paid to players. Suppliers would not determine the prices and this would be an advantage to firms.
Threats to Entry
Porter observed that an additional threat that a firm would face in the industry is the entry of a new player. The sports industry may not portray the features of a perfect competition market but it is very competitive. The industry has no barriers for new entrants, a fact that makes it very competitive. New firms can easily come up and offer serious competition to the existing firms.
Such cases have been very common whereby agents break up with their employers to start their own firms. Because they have an understanding of the industry, they find it easy to start and develop their own firms. This is because they have strong ties with some players and even clubs in different cities.
This poses a serious threat to the existing firms. In this industry, differentiation is very important for companies. There are different sectors each with its special requirements. For a firm to manage competition, it is required to have a deep understanding of all sectors and offer specialized products. Hence, differentiation would be very important.
Conclusion
Some of the top industry players engage in scouting of talents. Talents are no longer searched in specific locations as firms are keen to identify them in different places all over the world. Various academies for various sporting activities are also growing in almost every city, both in developed and developing nations. Some of the top challenges that the sport industry faces include unethical behavior of some industry players, who engage in practices that may bring down established players.
Discipline of players may also be considered a challenge. However, the emergence of the social media and increased number of cheap television sets are opportunities, as firms could reach an increased number of customers. It is therefore factual that the future of the sports industry is very promising, since sports becomes increasingly popular.